Are you thinking about buying a beachfront property or an ocean view property? Both are great choices.
As a property investor since 2003, one of my main goals has been to buy a beachfront property in Hawaii for my ultimate retirement home. So far, I've purchased three ocean view properties in the Golden Gate Heights neighborhood of San Francisco.
I believe ocean view properties in San Francisco are amongst the most undervalued properties in the world. Over the next couple of decades, ocean view properties will go from trading at parity to the median home price in San Francisco to a 50% premium.
Let's go through the pros and cons of owning a beachfront property and an ocean view property.
Beachfront Property Versus Ocean View Property
Both types of property are great. Both types of property should also trade at premiums to the median price home in your city. Beachfront property is more expensive than ocean view property. However, beachfront property is not necessarily better.
Pros of Ocean View Property
Here are some of the pros of ocean view property:
- On a hill, so more privacy
- More expansive views given you're higher up
- More affordable than beachfront property
- Less or no salt water damage
- Less wind damage
- No land erosion
- No flood risk, therefore, no need for flood insurance
- Great feng shui and peaceful vibe
Below is a picture of the ocean out of my office in Golden Gate Heights, San Francisco. Because the water is cold in San Francisco, I'd much rather have an ocean view home. It's nice to go to Ocean beach when the temperature is above 70 degrees ~3 weeks a year. However, even on hot days, swimming in the ocean is difficult.
Pros Of Beachfront Property
- Being able to walk out of your house and onto the beach and swim in the ocean, if warm, is amazing
- Amazing ocean sound that is relaxing and peaceful
- More rare property given there's less ocean front homes than ocean view homes
- More exclusive type of home
If you can own beachfront property where the water is warm and there is no historical occurrences of flooding or tsunamis, then beachfront property could be a good buy.
Climate Change Could Hurt Beachfront Property
Before you buy a beachfront home, it's important to know that climate change my hurt beachfront property values in the far future.
It's great to be able to step onto an ocean-facing deck and feel the sea breeze on your face every morning. While doing my morning stretches, it would be unbelievable to smell the ocean, especially now that rolling lockdowns will likely become the norm.
However, climate change can erode the land of beachfront homes and pose significant flood risk.
According to a study published in PLOS One, as many as 13 million people in the United States could be forced to move inland by 2100.
Take a look at this map of the United States that shows the areas most affected by rising sea levels (blue).
The cities the researchers say will benefit the most by 2100 from “climate refugees” include: Atlanta, Houston, Dallas, Denver, and Las Vegas. But I'm not so sure about Houston since it has its own flooding issues.
Since most of us will be dead by 2100, climate change isn't an immediate issue. However, for those of you considering investing in real estate for your children and your grandchildren, it's important to take into consideration climate change.
One of the main investment trends I'm investing in is real estate in the heartland of America. Lower cost real estate in non-coastal cities should do well given the rise of technology and remote work. If there is ever a flood issue due to climate change, non-coastal cities should also be beneficiaries of such migration change.
I could see a situation where climate change could knock off 20% of the value of beachfront property and increase ocean view property by 20%. Here are some problems with owning beachfront property you should be aware of.
Over a generation, a beachfront-property owner might lose a good portion of his land.
Ocean View Property Is A Better Buy
It's my opinion that ocean view property is a better investment than beachfront property. With the risk of flooding, tsunamis, land erosion, wind damage, and water damage, beachfront properties are too risky and too expensive to maintain.
That said, if you are extremely wealthy, then maintaining beachfront property isn't a problem. You want to live your life now and a beachfront dream house is probably ideal. In 100 years, when climate change may be an issue, we'll all be dead.
If your net worth is at least 10X the value of the beachfront home, I think it's safe to buy a beachfront home if that's what you really want. Otherwise, living a walkable or rideable distance away from the beach sounds good. If not, it's probably better to just buy an amazing ocean view home with some decks.
Be A Strategic Real Estate Investor
It's good to live the good life by buying and owning property that brings you a lot of joy. At the same time, it's worth strategically investing in real estate for solid income and greater returns.
In addition to looking for beachfront or ocean view real estate investment opportunities, look to diversify your real estate investments across the country where valuations are lower, net rental yields are higher, and growth rates may be higher.
Check out Fundrise and their eREITs. eREITs give investors a way to diversify their real estate exposure with lower volatility compared to stocks. Income is completely passive and there is much less concentration risk.
If you are bullish on the demographic shift towards lower-cost and less densely populated areas of the country, check out CrowdStreet. CrowdStreet focuses on individual commercial real estate opportunities in 18-hour cities.
Use the much higher income from your heartland real estate portfolio to pay for your beachfront or ocean view property expenses!
Both platforms are free to sign up and explore.
About the Author
Sam worked in finance for 13 years. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income. He spends time playing tennis, taking care of his family, and writing online to help others achieve financial freedom too.
Sam started Financial Samurai in 2009 and has grown it to be one of the largest independently owned personal finance sites in the world. You can sign up for his free private newsletter here.